East and Southeast Asia are aging rapidly. South Korea, for example, has become one of the fastest aging societies in the world. In France, 115 years (1865–1980) were required for the proportion of population aged 65 and over to rise from 7 percent to 14 percent, but in South Korea, it is expected that a comparable change will occur in only eighteen years (2000–2018). More strikingly, it will take only eight years (2018–2026) for the proportion of South Korea’s elderly to increase from 14 percent to 20 percent. The nation’s old-age dependency ratio grew from 5.7 percent in 1970 to 12.6 percent in 2005, and is projected to further increase to 72.0 percent by 2050. At the macroeconomic level, these figures suggest an increasing burden on the working-age population to support the elderly population.

Such figures, however, do not tell the whole story about the burden shouldered by the working-age population. The lives of elderly and working-age individuals are not separate but rather, are linked by the institution of the family. Working-age adult children often take on the role of caring for elderly parents, who may have functional limitations and cognitive impairments. Such informal family caregiving is embedded in traditional Korean culture, as it is in many Asian societies that uphold traditional norms of filial piety.

As the elderly population grows, the demand for elderly long-term care will increase sharply. The supply of informal care, however, is decreasing for a number of reasons. Declining fertility rates have already diminished the potential pool of family caregivers. Further reducing the availability of family caregivers is an array of socioeconomic changes, such as increased migration, decreasing rates of intergenerational co-residence, and increasing labor force participation rates among women, who have historically served as the main family caregivers. Adult children, therefore, will increasingly experience a conflict between parental care responsibilities and their own work. Anecdotal evidence suggests that many daughters or daughters-in-law give up their professional employment to care for their disabled parent(s) or parent(s)-in-law. The work-family conflict also has important implications for the economy—informal caregiving may have additional negative effects on the labor force participation of the already shrinking working-age population.

I recently conducted a study using data from the Korean Longitudinal Study of Aging. My study indicated that providing at least ten hours of care per week reduces the probability of female labor force participation by 15.2 percentage points. I concluded that informal care is already an important economic issue in South Korea even though its population aging is still at an early stage. If the current trend continues, the labor market costs of informal caregiving will increase as the country experiences the full force of the demographic transition. One of the expected benefits of the public long-term care insurance implemented in July 2008 is to help family caregivers participate more easily in the labor force. In Japan, there is some evidence that long-term care insurance positively affects female labor force participation, but such beneficial effects have not yet materialized clearly in Korea. In both countries, there is much to learn from early experience with long-term care insurance.

In most parts of Asia, informal caregivers remain invisible on the policy agenda, not only because of cultural norms that perpetuate family-centered care but also because informal care incurs no public cost. However, the demographic transition, coupled with socioeconomic changes in the region, underscores the need to examine whether informal care is really without costs, at both individual and societal levels. Throughout Asia, the challenge for public policy will be finding the optimal mix of informal, family-based and formal, socially supported elder care.

The Director of the Asia Health Policy Program, Karen Eggleston, served as guest editor of the International Journal of Healthcare Finance and Economics for the June 2009 issue. The eight papers of that issue evaluate different provider payment methods in comparative international perspective, with authors from Hungary, China, Thailand, the US, Switzerland, and Canada. These contributions illustrate how the array of incentives facing providers shapes their interpersonal, clinical, administrative, and investment decisions in ways that profoundly impact the performance of health care systems.

The collection leads off with a study by János Kornai, one of the most prominent scholars of socialism and post-socialist transition, and the originator of the concept of the soft budget constraint. Kornai’s paper examines the political economy of why soft budget constraints appear to be especially prevalent among health care providers, compared to other sectors of the economy.

Two other papers in the issue take up the challenge of empirically identifying the extent of soft budget constraints among hospitals and their impact on safety net services, quality of care, and efficiency, in the United States (Shen and Eggleston) and – even more preliminarily – in China (Eggleston and colleagues, AHPP working paper #8).

The impact of adopting National Health Insurance (NHI) and policies separating prescribing from dispensing are the subject of Kang-Hung Chang’s article entitled “The healer or the druggist: Effects of two health care policies in Taiwan on elderly patients’ choice between physician and pharmacist services” (AHPP working paper #5).

In “Does your health care depend on how your insurer pays providers? Variation in utilization and outcomes in Thailand” (AHPP working paper #4), Sanita Hirunrassamee of Chulalongkorn University and Sauwakon Ratanawijitrasin of Mahidol University study the impact of multiple provider payment methods in Thailand, providing striking evidence consistent with standard predictions of how payment incentives shape provider behavior. For example, patients whose insurers paid on a capitated or case basis (the 30 Baht and social security schemes) were less likely to receive new drugs than those for whom the insurer paid on a fee-for-service basis (civil servants). Patients with lung cancer were less likely to receive an MRI or a CT scan if payment involved supply-side cost sharing, compared to otherwise similar patients under fee-for-service. (This article is open access.)

The fourth paper in this special issue is entitled “Allocation of control rights and cooperation efficiency in public-private partnerships: Theory and evidence from the Chinese pharmaceutical industry” (AHPP working paper #6). Zhe Zhang and her colleagues use a survey of 140 pharmaceutical firms in China to explore the relationships between firms’ control rights within public-private partnerships and the firms’ investments.

Hai Fang, Hong Liu, and John A. Rizzo delve into another question of health service delivery design and accompanying supply-side incentives: requiring primary physician gatekeepers to monitor patient access to specialty care (AHPP working paper #2).

Direct comparisons of payment incentives in two or more countries are rare. In “An economic analysis of payment for health care services: The United States and Switzerland compared,” Peter Zweifel and Ming Tai-Seale compare the nationwide uniform fee schedule for ambulatory medical services in Switzerland with the resource-based relative value scale in the United States.

Several of the papers featured in this special issue were presented at the conference “Provider Payment Incentives in the Asia-Pacific” convened November 7-8, 2008 at the China Center for Economic Research (CCER) at Peking University in Beijing. That conference was sponsored by the Asia Health Policy Program of the Shorenstein Asia-Pacific Research Center at Stanford University and CCER, with organizing team members from Stanford University, Peking University, and Seoul National University.

As Eggleston notes in the guest editorial to the special issue, AHPP and the other scholars associated with the issue “hope that these papers will contribute to more intellectual effort on how provider payment reforms, carefully designed and rigorously evaluated, can improve ‘value for money’ in health care.”

WASHINGTON, D.C.-On the eve of President Obama's first meeting with South Korean President Lee Myung-bak, former Ambassadors Michael H. Armacost, Thomas C. Hubbard, and Charles L. "Jack" Pritchard, and other top U.S. experts today presented recommendations to the Obama administration for revitalizing and expanding the United States' alliance with the Republic of Korea (ROK, or South Korea).

"New Beginnings," a nonpartisan group of ten former senior U.S. government officials, scholars, and experts on U.S.-Korean relations co-sponsored by The Korea Society and Stanford University's Walter H. Shorenstein Asia-Pacific Research Center, praised the Obama administration for getting off to a good start in its relations with South Korea. They said that the election of new leaders in Seoul and Washington provided an opportunity to transform the vitally important alliance into a broader and deeper regional and global partnership. They noted that South Korean President Lee Myung-bak is committed to this goal and they urged the two presidents to take steps toward making that vision concrete at their upcoming meeting.

After briefing Obama administration officials, the group today released the report ''New Beginnings'' in the U.S.-ROK Alliance: Recommendations to the Obama Administration at a forum sponsored by the U.S.-Korea Institute at the Johns Hopkins School of Advanced International Studies. Following is a summary of the group's observations and recommendations on key U.S.-ROK issues:

North Korea: The regime appears increasingly unlikely to give up its nuclear capabilities. While Six Party Talks should be continued, the United States should consider bilateral talks with North Korea to explore whether a new mix of inducements and pressures might achieve U.S. and South Korean goals. Close coordination with the ROK and Japan is essential. China and Russia will apply only limited pressure to North Korea. The Obama administration should stress that the United States will never "accept" a North Korea with nuclear weapons. The United States must have a consistent, long-term strategy to encourage North Korea's "transformation." The United States, ROK, and Japan should seek a high-level understanding on how to deal with possible future instability in the North and offer to include China in such consultations.

Military Cooperation: The United States should fully implement the Bush administration initiatives to realign U.S. Forces Korea and transfer wartime operational control of South Korean forces to the ROK as scheduled in 2012.

Economic Cooperation: Congress needs to approve in a timely manner the bilateral free trade agreement with South Korea (KORUS FTA). This is especially important in light of the ROK's impending conclusion of a similar agreement with the European Union. Such approval will demonstrate the United States' commitment to free trade as a generator of growth, particularly during times of financial crisis and economic recession.